Commission on the Delivery of Rural Education: report

Chapter 7: Resources for rural education

92. The Commission has sought to understand how rural schools are funded and address the contested area of the cost savings that can be achieved by closing rural schools. There is not a direct relationship between the resources available and their use to support rural schools. However, there is much clarity that can be provided on the funding implications for a local authority in maintaining or closing a small rural primary school, and this detail and the importance of understanding it is set out in this chapter.

93. In summary, when cost is often one of many considerations behind closure proposals it is vitally important that the cost implications of a proposal are accurately and transparently understood.

94. The cost of the provision of small schools varies across local authorities, related to the different challenges faced in each area and the policy choices the authority has made. The cost also varies with the size of school with the strongest correlation being with the pupil to teacher ratio. Small schools with full class complements can operate at a similar cost per pupil to larger schools. Single teacher schools with low pupil numbers have very few pupils per teacher and per school building and can be significantly more expensive on a per pupil basis. Standard teaching staff levels provide trigger points for additional teachers and while the additional costs of operating a sub-optimal pupil:teacher ratio are similar for small and large schools, the change in cost per pupil at a small school due to the arrival or departure of a few children can be much greater than at a larger school.

95. Many of these different factors are addressed through the funding settlement from the Scottish Government to local government which supports the funding of education provision in Scotland. This distribution uses a needs based model which provides more resources to areas with the highest needs, often due to deprivation or rural factors. In particular, the small size of school is taken into account through an additional element of funding per pupil in rural primary schools with fewer than 70 pupils. There are further elements in respect of Gaelic medium education, and island needs, to mention just two. It is the size factor that is most relevant to the debate around the accurate resource implications of closing small rural schools. The Commission recommends that it is essential that local authorities understand and include the impact of a closure proposal on their local government finance settlement in presenting the costs or savings from the closure, and that this level of detail should be provided at pre-consultation stage.

How are rural schools funded?

96. Delivery of education is the responsibility of Scotland's 32 local authorities and they receive a block grant, the General Revenue Grant, from the Scottish Government to fund this (and other public services). This local government finance settlement is calculated using a mechanism called Grant Aided Expenditure ( GAE) which identifies need for services in all 32 authorities and apportions the grant in accordance with that need, such as the additional cost of supporting small rural schools.

97. For any local authority this addition to the revenue grant can be calculated. In 2011-12, the size of impact ranged from approximately £2,600 to £2,900 per pupil. ¹¹ If the number of qualifying pupils increases or decreases, the gain or loss to any local authority would be the number of pupils multiplied by this value, irrespective of actions other local authorities had taken in relation to their own rural primary school provision.

98. This GAE funding factor funnels equal support towards all pupils in this category of school although the costs of provision are markedly greater in the smallest schools and only slightly greater than average in the schools with close to 70 pupils. However, if all local authorities have a range of different sizes of small schools and make decisions on the basis of supporting outcomes not manipulating a funding mechanism to maximise revenue (and this principle is agreed between national and local government), there is no reason why this support cannot effectively provide the greatest funding to those with the greatest need. The effectiveness of each 'secondary indicator' such as this in the local government settlement is reviewed each time the settlement is calculated to ensure that it accurately reflects need.

99. It is critical to understand that GAE is not a budget, target or expenditure guideline for local authorities and still less for individual schools. As a result of the Concordat in 2007 between the Scottish Government and local government, it is for local authorities to determine how they allocate all the funds they receive in the local government settlement and funds are not 'ring fenced' for particular purposes.

100. Nonetheless, given that this funding element is directly linked to the number of pupils in small schools, when considering the revenue savings from a specific school closure proposal, a complete picture of the financial impact on the local authority must include the impact of the proposal on the authority's future local government finance settlement. To illustrate this it is helpful to consider some different scenarios based on actual data:

• A school with a roll of 54 was proposed for closure to merge with a much larger new campus. The proposal document estimated savings of £125,000 per annum but contained no allowance for GAE which was a significant factor. The school did not close and the authority currently attracts around £213,000 per annum through GAE in respect of the school which now has 69 pupils.
• A school with a roll of 11 pupils was proposed to merge with another school of 23 pupils making a combined roll of 34. There was no GAE impact as the total roll following merger was still below 70 pupils and as such this was not a factor in the closure debate. The closure went ahead.
• Five small schools with rolls of between 16 to 50 pupils were proposed for closure such that mergers ultimately resulted in no school with a roll of less than 70. The local authority went ahead with these closures but the savings were estimated ¹² to have been outweighed by the loss of GAE which resulted in an annual loss of income to the authority estimated at around £440,000 ¹³ for 2012-13.

101. This section is based on detailed information the Commission received in a tripartite paper produced in association with Scottish Government officials, COSLA and the Scottish Rural Schools Network ( SRSN). This paper is available as an appendix to the Commission report. SRSN also offered further detailed analysis of the impact of GAE, including examples of the impact it calculated on specific local authorities, which SRSN believes it is important to read alongside the data in this Chapter. This detail, which is solely the work of SRSN, is included amongst the evidence papers submitted to the Commission available on its website.

Lobster Pots

Cost variation with size

The cost of education in small schools is closely related to the number of pupils, and the data below is intended to illustrate this variation with size. Two local authorities provided the data below, to demonstrate variation between authorities and that the trend is similar. It is also worth noting that very few pupils are in schools in the smallest categories and that it is likely that these are particularly remote, often strategic schools. The Commission is grateful to both authorities for permission to publish this data.

School roll	Scottish Borders Council		Comhairle nan Eilean Siar
	Average total cost per pupil	Number of pupils	Average total cost per pupil	Number of pupils
10 and under	No schools	none	£18,763 15	10 and under
11-20	£8952	70	£11,883	102
21-30	£6603	56	£8494	45
31-50	£5332	501	£8954	170
51-70	£4626	757	£8133	191
70 and over	£3699	6807	£5477	1316

It is important to understand that this table is intended to give the cost of running the schools concerned. It does not take into account the additional revenue in respect of all pupils in these schools that a local authority receives through GAE, as set out in paragraphs 95 -98.

It is also important to note that while the costs for Comhairle nan Eilean Siar's schools display a similar trend, these costs are influenced to some extent by the Comhairle's model of Gaelic medium education. The Comhairle also regularly benefits from the funding protection mechanism known as the 'floor', which, in common with other authorities which benefit from the 'floor' mechanism, has the effect that its overall funding settlement is less reflective of GAE factors than the settlements received by the majority of Scotland's local authorities.

Both local authorities noted to the Commission that their spending on education is more than the GAE funding streams mentioned above and is supplemented from other funding sources due to local policy decisions.

Financial and economic challenges around service delivery

102. The Commission noted the financial pressures faced by local authorities and which compete against the requirements of the 2010 Act when allocating resources to meet all the needs in local authorities.

103. There is a significant financial challenge associated with maintaining service provision for local authorities across Scotland. As funding is reduced for all local government services, the demand for services continues to steadily increase. The Commission is aware that the pressure on service provision, due to an ageing population projected in the next 10 to 20 years, will significantly increase these challenges and the rationalisation across public services which will have to be considered.

104. Local authorities across Scotland have made significant savings over the last three financial years whilst trying to maintain service delivery. Local authorities gave evidence that there is now very little scope to make savings without reduction in service delivery and local services will be affected over the short to medium term as the need to make further savings continues to contribute to strategic decision making. With increasing demand for services, coupled with a highly restricted financial environment, the Christie Commission ¹⁴ found that approximately £40bn of savings must be made over the next 10 years just to maintain current levels of service delivery. The Commission, therefore, recognises that local authorities are no longer in a position to provide the same level of service in any area and reductions in service are not only likely but inevitable.

105. For most local authorities and particularly rural ones, the three biggest areas of education spend are on teachers, buildings and transport. With very little flexibility related to teachers' costs or transport, this often means the only place to seek to make significant savings is on staff where closing a small school leads to reductions in overall staff numbers and costs. While savings in buildings costs may also be made, modifications to receiving buildings or new build costs and increased transport costs must be considered alongside these savings. Such costs may be substantial. In making any assessment it is essential that the full financial facts are considered including the substantial level of funding received in direct proportion to the number of pupils in these smaller schools, as well as the requirements of the 2010 Act in relation to these schools.

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106. Financial pressures affect rural local authorities as much as they do more urban areas. The current interpretation of the 2010 Act does not allow local authorities to acknowledge the impact of the financial climate on their decision making. The Commission concluded that it was not sustainable or transparent for financial factors to be hidden from closure proposals. Irrespective of the GAE funding factor which provides funding support in respect of many of the small rural schools in Scotland, the Commission recognised that in the current economic circumstances it was understandable that local authorities felt constrained to consider all expenditure. This includes expenditure on small rural schools, and that these could not be protected from the financial pressure placed on all services or favoured unreasonably over alternative education spend or other services. However, decisions should not be taken on simplistic financial assumptions and must comply with the 2010 Act and its guidance (revised as necessary following this Report).

107. If financial issues are to be a factor in school closure decisions, alongside educational factors (as discussed in Chapter 6), it is critical that this is based on accurate and transparent data, not assumptions or crude estimates of complex matters. This will require an agreed methodology and template across local authorities for deriving individual school costs irrespective of variation between local authorities' education budgets, but taking into account factors such as Gaelic provision.

Recommendation 21:

School closure proposals should be accompanied by transparent, accurate and consistent financial information, rigorously evidencing any financial argument that is deployed. The impact, if any, of the proposal on the General Revenue Grant that the authority would receive in future, should be clearly provided.

Recommendation 22:

Clear guidance and a template for financial information should be developed to ensure financial information is presented in a complete and consistent manner.

Duties on local authorities

108. Since 2003, local government in Scotland has been delivering services against the strategic background of Best Value legislation as set out in the Local Government in Scotland Act 2003. This required all local authorities to "make arrangements to secure continuous improvement on performance (while making an appropriate balance between quality and cost); and in making those arrangements and securing that balance, to have regard to economy, efficiency, effectiveness, the equal opportunities requirements and to contribute to the achievement of sustainable development". ¹⁵

109. This has prompted the Commission to consider the extent to which there is a tension between the requirement Best Value places on local authorities' asset and resource management and the needs of delivering services to sparsely populated rural areas. This tension has led to a perceived conflict between the provisions of the 2010 Act and the judgement Audit Scotland makes on a local authority's achievement of Best Value and continuous improvement.

110. Low school occupancy or 'capacity' figures are often part of a school closure proposal and proposals sometimes draw on an Accounts Commission Report ¹⁶ which suggested schools with less than 60% utilisation offered potential for rationalisation. This interpretation was clarified by Audit Scotland in its evidence to the Commission where it was pointed out that the report acknowledged that some schools would also run 'under capacity' due to local demographics. However, this 'principle' and the now discontinued use of school capacity figures as a statutory performance indicator by the Accounts Commission, gave capacity significance in local authorities' assessment of schools.

111. In fact, the Accounts Commission's 1995 report, and the guidance accompanying their statutory performance indicators, identifies other relevant factors including whether there is suitable alternative provision locally; isolated rural schools and the impact of closure on travel time; and the role of the school within the community. If capacity is considered in the context of these relevant factors, there is less tension between Best Value and the approach of the 2010 Act. The Commission concluded that local authorities should focus on sound management of their resources to meet the needs of all communities in their area, including regular reviews of the school estate and that an undue focus on capacity was likely to be unhelpful and unnecessary. To ensure that figures are consistent and reliable, the Commission suggests that a consistent approach to capacity modelling is agreed across Scotland.

112. The Commission concluded that capacity measurements had little place in the assessment of the viability of small remote schools. For many small schools with limited facilities, one of their few advantages is a relatively large classroom space which is used to excellent effect to support the small group and individual learning necessary for multi-stage composite classes. Under-used capacity compared to urban norms is almost inevitable in serving a sparse population. Where 'real' spare capacity exists, in the form of surplus classrooms or other space, it would be better to consider it as an opportunity to base additional services at the school, such as health, childcare, adult learning or employment services. This would allow local authorities to work with partners to co-fund the building or facility, making it more economical to maintain.

113. One solution to improving value for money should be promoting innovation in rural asset management and use, by empowering communities to support their schools, for example in accepting practical assistance from communities as discussed in Chapter 5. This reflects the aims of national and local government as set out by the Christie Commission in 2011. Where there are barriers to this, the Commission strongly encourages national and local government to work together to remove these.

Recommendation 23:

A consistent approach to school capacity modelling should be agreed between the Scottish Government and local authorities.

Parents helping with school upkeep

In Moray, parent and community involvement in school building works is relatively common. Parent groups and voluntary organisations in both rural and urban areas have carried out tasks such as classroom painting, minor improvements and snow clearance. The Commission visited a small school where parents had painted and carried out other improvements to the toilets with the permission of the local authority. With the support of parents and the community, pupils had also helped to refurbish the gymnasium and were proud of their achievements.

Moray Council welcomes this type of community involvement but has indicated that, while helpful, it does not significantly address the overall maintenance requirements of its schools. The local authority also highlighted the need for community involvement to be carefully monitored in order to ensure that procurement, health and safety and building regulations are adhered to.

Contact:
Nick.Goodchild@moray.gsx.gov.uk